Vivid Economics Update

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New Vivid work includes focus on carbon leakage and green finance

Welcome to our summer update. It has been a busy time here in the Vivid office with some of our work focussing on green finance, carbon leakage and comparative climate policy performance.

Our modelling team examined the extent of possible carbon leakage scenarios in the EU under a range of future carbon prices on behalf of the Department of Energy and Climate Change (DECC) in the UK. We evaluated the current criteria used by the European Commission in determining whether a sector is at risk of leakage and compared it against the available alternatives. In addition, we conducted a review of the likely effectiveness of various policy options available for combating leakage. We considered ten sectors in detail – aluminium, cement, ceramics, glass, fertilisers, lime, malt, paper, refineries and steel. The case studies examined the impact of carbon prices on the distribution of market share, emissions and international competitiveness. You can read the report here, the case studies here and an interview discussing the report with Vivid Economics director Robin Smale on Bloomberg here.

Below you’ll find some of the other international and UK projects we have delivered recently. For more information on these, or for details on our many other projects not mentioned here, please feel free to email us.

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Financing Green Growth: We carried out an independent piece of research for policymakers and private sector stakeholders attending the Clean Energy Finance Summit at St James’ Palace in London. We found that private sector green finance flows at scale when project economics of investments are sufficient; when there is sufficient access to finance; and when the broader political economy is conducive to green investments. A stocktake of current challenges and successes in each of these areas described public policy interventions available to increase private sector green finance. We also provided a set of recommendations which could increase investment flows towards the level required to meet internationally-agreed goals. The report is available here.

ICF Delivery Options: This month, we delivered a significant study for the UK Department for International Development and the Department of Energy and Climate Change advising on future delivery options for the International Climate Fund (ICF). The report analysed key gaps in the international climate finance architecture and assessed relative institutional capacities. We identified the UK Green Investment Bank, the Private Sector Infrastructure Development Group and the CDC as potential delivery vehicles for some of the ICF’s resources. We also reviewed some of the risks, barriers and uncertainties involved in the use of these vehicles. You can read the full report here.

Climate Policy Progress and Performance: WWF-Australia asked us to perform a comparative analysis of Australia’s progress towards attaining its climate change targets against key comparators. For each country, we analysed historic emissions performance, projected trends and national targets to assess whether or not they are on track to meet their stated goals, and compared the results against projections for Australia. As indicated by the above graph, Australia is expected to fall far short of its targets, and compares unfavourably to all countries in the analysis including the US and China. We also reviewed recent policy developments including those on renewable investment, energy efficiency and carbon pricing for each country to further complement the results. You can find the full report here and read some of the extensive coverage of it in the Australian media here.